(Reuters) - Marlboro cigarette maker Altria Group Inc on Thursday announced it would pay $12.8 billion to take a 35 percent stake in Juul Labs Inc, a marriage between an old-line tobacco giant and a fast-growing electronic-cigarette rival looking to make inroads among smokers.

The deal values San Francisco-based Juul at $38 billion, more than double the roughly $16 billion valuation it fetched in a July private funding round, highlighting what Altria sees as its next phase of growth in the face of declining smoking rates and cigarette sales in the United States.

"We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes," Altria Chief Executive officer Howard Willard said in a statement.

For Juul, which has risen swiftly over the last three years to become the U.S. market leader in e-cigarettes, the Altria investment is expected to give it more prominent distribution in convenience stores and other traditional retail channels.

Altria also brings years of lobbying expertise in Washington that could benefit Juul as the company navigates heightened federal scrutiny over its products' popularity among teenagers.

Under terms of the deal, Altria is subject to a standstill agreement under which it may not buy additional Juul shares above its current interest. Altria has also agreed not tosell or transfer any Juul shares for six years from the closing of the deal.

Juul's vaping devices, which vaporize a nicotine-laced liquid and resemble a USB flash drive, grew from 13.6 percent of the market in early 2017 to more than 75 percent this month, according to a Wells Fargo analysis of Nielsen retail data.

Federal data released last month showed a 78 percent increase in high school students who reported using e-cigarettes in the last 30 days, compared with the prior year, coinciding with the rise in Juul's popularity.

The U.S. Food and Drug Administration last month announced new curbs on sales of flavored e-cigarette products, including Juul's mango and cool cucumber, amid fears that the products could lead a new generation into nicotine addiction.

Juul has boosted its own lobbying spending throughout this year, spending $890,000 so far in 2018, according to the Center for Responsive Politics. That's still far less than Altria's more than $7 million toward lobbying this year, making it the biggest spender in the U.S. tobacco industry.

One unknown is how the deal could affect Juul's reputation in the marketplace. In many ways the company positioned itself as the foe of big tobacco, saying in job postings that it was "disrupting one of the world's largest and oldest industries" and "driving innovation to eliminate cigarettes."

Tobacco companies including Altria have been investing in e-cigarettes as U.S. smoking rates decline, but those products have lost significant market share over the last year as Juul's popularity has surged.

Altria said this month it would discontinue some of its e-cigarette brands, based on their financial performance and will take a related pre-tax charge of $200 million in the fourth quarter.

Federal data from earlier this month showed cigarette smoking among U.S. adults reached an estimated 14 percent in 2017, the lowest level ever.

Altria's cigarette volumes declined by 6.3 percent for the nine months ending this September, compared to a year earlier. The company's share price has fallen by nearly 30 percent over the last year.